Municipal Consolidation and Local Government Behavior: Evidence from Japanese Voting Data on Merger Referenda

The empirical literature investigating the role of key features of local governments regarding decisions on consolidation tends to use a dummy that takes 1 if adjacent local governments decide to merge. Under the estimation method, it is difficult to identify which governments have no incentive to merge. The current study presents an empirical test of decision on consolidation using voting data from Japanese local referenda that distinctively identify the preferences of specific individual municipalities. I find evidence that municipalities that could enjoy large economies of scale from a merger prefer consolidation, and large and small municipalities are likely to merge.